Many older people have spent years paying off mortgages and have most of their wealth tied up in their homes, but often don’t want to have to move to free up these funds. Equity release offers a way to access this property wealth and enjoy its benefits in retirement.

The cash influx from housing wealth is instant and the results are immediate in terms of improvement in living standards and reaching the goals set out in retirement. It’s one thing scraping by in retirement and meeting necessary needs, but most people had greater ambitions than that.”

Barriers to equity release

Social norms and myths often act as a barrier to equity release, with a stigma attached to debt in later life, despite the fact that releasing equity may provide a way to boost your budget in retirement and secure a comfortable lifestyle for those who are asset rich but cash poor.

With equity release, interest is charged on any funds released which rolls up over time and is only repaid when you die or move into long-term care.

If you are considering equity release, always seek professional advice first. Ask for a personalised illustration so that you understand the features and risks to you, as well as projections of exactly how much you could end up repaying overall. This can be important as the tax-free cash you release may affect your entitlement to means-tested benefits. Plans provided by lenders approved by the Equity Release Council come with a ‘no negative equity’ guarantee so that you’ll never owe more than the value of your home. You are also retain the right to stay in your home for life or until you go into long-term care.

Many people’s biggest concern about equity release is that it will reduce the value of any inheritance they want to leave their children. Whilst unlocking property wealth will indeed affect the value of your estate, many equity release plans come with ‘inheritance protection’ which enables you to select a percentage of the property value that you want to protect. It’s also a good idea to discuss equity release with your family first so they are fully aware of what it means both for you and them.

It’s important to note too that pension freedoms introduced in 2015 mean that pensions are now an inheritable asset alongside property and other financial assets. As a result, those who are keen to pass on an inheritance to their children may consider leaving their pension rather than their property. Again, seek professional advice to help you make the right decision based on your individual circumstances.

Growth of equity release

Increasing numbers of homeowners are already tapping into their property wealth as a source of income in retirement. Latest figures from the Equity Release Council, the trade body for the equity release sector, show that equity release lending has more than doubled since 2016. Nearly £10m of housing wealth was withdrawn each day in the first three months of 2018, compared to £4.3m over the same period two years ago.

David Burrowes, chairman of the Equity Release Council said:“It is clear that equity release has become an increasingly useful and flexible financial planning tool for older homeowners,

While pensioners’ income is on the rise, a potential over-reliance on private pensions could lead to a retirement income shortfall in the future. New sources of income in later life are increasingly being sought, and this highlights the need for a rounded approach to retirement planning which considers all wealth, assets and product choices.”